CEO Brad Garlinghouse sat down with IMF’s Deputy General Counsel Ross
Leckow for a fireside chat on Monday afternoon at the Singapore Fintech
Festival. They engaged in a far-reaching dialogue on the opportunities
blockchain and digital asset technology presents for financial
institutions in ASEAN, given the the region’s unique regulatory
frameworks. Both affirmed that this game-changing technology will change
the world of global payments as we know it today. We’ve captured some
key highlights from their conversation below.

Questions and Answers

Garlinghouse: What does Fintech mean to the IMF? What’s the IFM’s interest in it?

Leckow: The IMF is devoting a lot of attention to
Fintech and blockchain. Blockchain technology must be discussed in the
context of other technology trends, too, such as cloud computing,
digital assets, APIs, mobile and more. Our member countries are looking
for advice. They want to know how to approach and unlock benefits of
Fintech while also putting together regulation to minimize the risks. In
addition to publishing research, the IMF is engaging closely with
private sector and industry.

ast year, we put in place a high-level advisory group of industry
leaders from the public and private sector to help guide our work in
Fintech. We are happy to have on this advisory board leaders like Chris
Larsen, Executive Chairman of Ripple’s board of directors and former CEO
and co-founder of Ripple, and Sopnendu Mohanty, Chief Fintech Officer
of the Monetary Authority of Singapore. We also launched, in conjunction
with The World Bank, The Bali Fintech Agenda, which is the first comprehensive framework of issues that countries need to think about when designing policy for Fintech.

Leckow:
From your perspective, what is going on in the private sector? What are
the blockchain challenges and opportunities unique to the ASEAN market?

Garlinghouse:
Regulatory clarity has a huge ability to drive digital asset and
blockchain adoption. It is surprising how many markets still have
uncertainty. But, in ASEAN, the regulatory environment for blockchain
and digital asset technology is clear.

Several countries have contributed to this, including Singapore, Thailand and the Philippines. In particular, Thailand has introduced a framework that balances consumer protection with innovation. It legalizes several digital assets, including XRP, and provides clear and explicit guidelines for outside blockchain companies to operate.

This
clear regulatory environment makes it easier to apply blockchain and
digital asset technology to solve real-world business use cases, such as
improving cross-border payments across the ASEAN region. The East Asian
markets received $130 billion in inbound remittance payments last year
alone. They are expensive, and the market is ripe for adoption of new
technology, like blockchain, to drive costs dramatically lower.

In
terms of challenges, it is true that historically the region has been
behind by correspondent banking. Global banks are contracting some of
their traditional correspondent relationships, and this is creating more
friction in payments in ASEAN.

But some financial institutions are seeing this challenge as an
opportunity. Nearly 50% of all of our global customers are based in the
region, and our Singapore headquarters continues to be a growth engine
for Ripple — expanding by 200% in the past year.

Garlinghouse: As the regulatory expert, what are the
characteristics of ASEAN that you think will either propel this region
forward in regards to blockchain, or stifle its path?

Leckow: When you discuss regulatory frameworks for
blockchain and digital assets – globally, not just in ASEAN markets —
the conversation is in an early stage and a lot more work needs to be
done. Every country in this region also has very different needs. Some
are further ahead than others in thinking through policy, and it’s not
surprising that they’ve taken different regulatory approaches.

But, in the ASEAN region, there is general openness in embracing
Fintech and allowing innovation to happen. Fintechs in this region are
willing to engage with regulators and let them understand the
technology, services and products that they’re producing in the early
stages of development. Regulatory sandboxes in Singapore, Malaysia,
Thailand and Indonesia are examples of this.

Regulators have also been willing to work with the private sector in
this region to put frameworks in place when they see a good example of
how technology can help solve a real problem, to allow the use case to
develop. Cross-border remittance is a good example of a use case that is
very important here. Regulators here have demonstrated a willingness to
engage with each other and others around the world — a type of
cross-border cooperation has emerged that involves the right
stakeholders and helps develop solutions to solve for problems like
this.

Leckow: It’s very apt that we are discussing the
present and future of Fintech, and blockchain in Singapore. ASEAN, in
particular, has leapfrogged much of the world in both innovation and
thoughtful regulation of blockchain technologies. Brad, as you discussed
earlier, cross-border payments in this region are a great use case for
blockchain. Tell me more about why this is the case.

Garlinghouse: We see a high degree of pain in
cross-border payments in terms of how long it takes, how much it costs
and the surprising lack of transparency in each transaction.

We see this in ASEAN, in particular, because this region has been
left behind by the correspondent banking network. Banks like Siam
Commercial Bank (SCB) are moving aggressively to address this need,
embracing digital asset and blockchain technology to solve these
problems. SCB now serves as next-generation hub, a regional clearing
partner on the network, to improve connectivity and coverage across
these underserved areas. The bank is also able to make payments into the
region faster with lower costs and greater transparency.

Blockchain and digital assets also solve for problems sourcing liquidity
for cross-border payments. Today, approximately $10 trillion sits
parked around the world in pre-funded accounts to enable these
transfers. Ripple’s network leverages this powerful new technology to
make cross-border exchanges work without the pre-funded accounts. By
unlocking this capital, Ripple is helping to accelerate the global
engine of commerce in a way that’s good for corporations and consumers
throughout the region, and around the world.

Garlinghouse:
I know that the IMF has had several big meetings lately. Have you
discussed more about digital assets, and can you share what are the
IMF’s views on these are?

Leckow: The IMF takes a balanced view. Each country
has to decide for themselves what type of regulatory framework is best.
But generally speaking, they should be cognizant of risk but also the
potential to make the global system more efficient, more inclusive with
this new technology.

The international community has been doing a lot of work on creating a
framework for the regulation of digital assets. The basic approach has
been to impose on new service providers, like exchanges, the customer
due diligence that banks conduct in cross-border payments. Now, the
community is working together. Entity-based regulation is complemented
by activity-based regulation. Banks and exchanges are now subject to the
same regulation

Regulation should be proportionate to the risks so that it does not
stifle innovation. International cooperation in regulation, what can be
accomplished when countries work together, is critical to achieving this
goal.

Leckow: How will blockchain make a lasting impact on the global financial sector, and society more generally?

Garlinghouse: The big picture we are trying to solve at a macro level is enabling an Internet of Value
— a world where value moves like information does today. The
introduction of the Internet in the ‘90s has driven data
interoperability and catalyzed opportunity for global commerce. But
value interoperability, the seamless exchange of money around the world,
does not exist today. Close to 3 billion people are unbanked, and there
is tremendous opportunity for us to bring them into the community, into
the global economy. We must totally change the nature of how payments
flow around the world. We must remove the friction and make the stream
of value more instantaneous and reliable.

Introducing XRP Ledger (rippled) version 1.1.2

XRP Ledger (rippled) version 1.1.2 is now available.

The
XRP Ledger version 1.1.2 release includes a fix for a technical issue
in the consensus “preferred ledger by branch” code, which could cause a
validator to fail to settle on a single preferred branch of unconfirmed
ledger history. While this is not entirely unexpected and the code is
designed to handle it, this issue exposed a corner case where the
stringent safety guarantees of the consensus algorithm, as outlined in
the recent Analysis of the XRP Ledger Consensus Protocol paper, make it difficult for the entire network to efficiently recover from this condition.

Action Required

If you operate a XRP Ledger validator server, then you should upgrade to XRP Ledger version 1.1.2 as soon as possible.

Impact of Not Upgrading

If
you are not running release 1.1.2 or greater, then your validator
server can potentially fail to settle on a single preferred ledger
branch during consensus and resort to issuing partial validations, until
it can resync with the network.

Other Information

Bug Bounties and Responsible Disclosures

On behalf of the XRP Community, Ripple welcomes reviews of the XRP Ledger
open source codebase and urge reviewers to responsibly disclose any
issues that they may find. For more on Ripple’s Bug Bounty program,
please visit https://ripple.com/bug-bounty/.

Boost Compatibility

When compiling XRP Ledger from source, you must use a compatible version of the Boost library. As of XRP Ledger version 1.1.2, Boost 1.67.0 is required for all platforms.

1.1.2 Change Log

Bug Fixes

Contributions

We welcome external contributions to
the XRP Ledger codebase. Please submit a pull request with your proposed
changes on the GitHub project page at https://github.com/ripple/rippled.

On behalf of the XRP Community, Ripple would like to thank those who have contributed to the development of the XRP Ledger (rippled)
open source code, whether they did so by writing code, running the
software, reporting issues, discovering bugs or offering suggestions for
improvements.

The following is the list of people who made code contributions, large and small, to rippled prior to the release of 1.1.2:

JNFX,
SendFriend, Transpaygo, FTCS and Euro Exim Bank will leverage the
digital asset XRP to source liquidity on-demand when sending payments on
behalf of their customers. Using XRP for liquidity
when sending a cross-border payment helps financial institutions avoid
the hassle of pre-funding accounts in destination currencies. It allows
them to make faster, lower cost payments than they can through the
traditional correspondent banking system.

For the financial
institutions on RippleNet not currently using XRP for liquidity but
interested in immediate settlement—such as CIMB or Olympia Trust
Company—they are able to leverage Ripple’s technology and modern APIs
for faster, lower cost and more transparent payments.

Kaushik Punjani, Director, Euro Exim Bank: “As a leader in trade
finance solutions for global corporates and fintechs, we are uniquely
placed to offer new payment channels and ways to source liquidity. Our
customers—whether big corporates or individual remitters—have
historically been restricted from obtaining suitable funds or settling
transactions in a cost efficient and timely manner. Working
collaboratively with Ripple and selected counterparts, we have designed,
tested and are implementing both xCurrent and xRapid in record time,
and we look forward to the benefits these will bring our customers.”

David
Lighton, Founder, SendFriend: “The existing correspondent banking
system is slow, inefficient and costly. SendFriend was founded at MIT
with the belief that there must be a better way to send payments. We are
excited to partner with Ripple to do just that. Through our
partnership, we are bringing our customers a next-generation, blockchain
payment solution that leverages XRP to address many of the efficiency
and equity problems with existing remittances. For them, that means
cheaper and faster payments.”

Ashay Mervyn, Head of Emerging
Markets, JNFX: “Payments between countries are beset with
inefficiencies—inefficiencies around cost, inefficiencies around speed
and inefficiencies around transparency. RippleNet is specifically geared
to address these problems. For our customers who range from the largest
conglomerates in Africa (with operations and commitments in over 40
countries) to individuals in villages in rural Nigeria, our decision to
join RippleNet and utilize their payment solution—including XRP for
on-demand liquidity—just makes sense.”

“In 2018, nearly 100 financial institutions joined RippleNet, and
we’re now signing two—sometimes three—new customers per week. We also
saw a 350 percent increase last year in customers sending live payments,
and we’re beginning to see more customers flip the switch and leverage
XRP for on-demand liquidity,” said Brad Garlinghouse, CEO of Ripple. “At
the end of the day, our goal is to make sure our customers can provide
excellent, efficient cross-border payments experiences for their
customers, wherever they are in the world.”

RippleNet currently
operates in over 40 countries across six continents. If you are
interested in learning more, please visit us here.

A Global Look at the Future of Blockchain and Fintech Innovation

What does the future hold for fintech innovation overall and
blockchain in particular? That question was posed to a panel of
visionary leaders assembled from around the globe by Ripple’s SVP of
Business & Corporate Development Kahina Van Dyke at Swell 2018 last
fall.

As we step into 2019, it’s helpful to revisit their thoughts on the
role of regulators, the real-world applications for blockchain underway
in Africa, how to drive innovation from within large financial
incumbents, and other meaningful changes already underway around the
globe this year.

Importance of fintech in Africa

Tokunboh Ishmael, Chairwoman at African Venture Capital Association
and Managing Director, Director and Founder of Alitheia Capital, helped
jumpstart the conversation with her thoughts on fintech in Africa. As a
financial service and digital computing veteran that now manages fintech
investments from her offices in Lagos, Nigeria, she has had a front row
seat to the evolution of fintech on the continent.

When she began investing in fintech more than 10 years ago, she said
research showed 70% of the Nigerian population was excluded from the
banking system. Like much of Africa, Nigerians operated on a cash basis
because banks and retail institutions had become complacent serving the
1% of the population with money.

But as fintech activity and investment increased, there has been a
marked shift in the country. Emerging fintechs have made it possible for
Nigerians to use digital services instead of cash for payment and other
basic functions. At the same time, these upstarts have spurred the
incumbents to re-evaluate their business models and begin serving a
wider swath of the population.

One of Ishmael’s favorite examples is a company called Paga that had
2,000 clients when she initially invested. Now, ten years later, they
have nine million customers—a level nearly on par with Nigeria’s largest
bank that is 100-years-old and serves 10-12 million people.

As a result of this success story and others, new research shows that
the number of unbanked Nigerians has shrunk from 70% to 45% of the
population.

Fintech environment in Europe

While the number of underbanked customers might be less in Europe,
the continent is seeing similar levels of disruption and innovation. Ben
Brabyn is Head of Level39, a fintech and cybersecurity community in
London that numbers more than 200 companies and is charged with
elevating both these disruptors and awareness for the technologies at
large.

Brabyn attributes much of Level39’s success to the unique nature of
London. As a city, he said it blends the tech environment of San
Francisco, the creative community of Los Angeles, and the banking chops
of New York with the political and regulatory activity of Washington
D.C.

This has led to a thriving community of disruptors with deep roots in
adjacent areas of expertise. The resulting level of cooperation has
made for what Brabyn thinks are distinctive gains in innovation.

How to foster innovation at incumbent banks

Amy Radin is the former Chief Innovation Officer at Citi, E-Trade and
a number of other leading financial brands, and the author of The
Change Maker’s Playbook, a book profiling change agents in business.

When asked by Van Dyke (a former colleague) how incumbent banks can
innovate from within, Radin wryly observed it’s been ten years since the
collapse of Lehman Brothers and the onset of the financial crisis. She
was laid off then because at the time banks associated the idea of
innovation with the creation of toxic assets that contributed to the
collapse.

As a result, the last ten years have been challenging for the big
banks. Focused on reducing expenses and managing compliance, she says
they took their eye off the innovation ball and now have to play catch
up.

She pointed to the example of Citi, which downsized from 375,000
people at the time of her dismissal to a little over 200,000 now. That
reduction eliminated a vast amount of institutional memory and created
an outflow of talent to other companies and upstarts.

Radin says that over the last five years, these same banks have now
become more attuned to innovation and opportunities. Specifically, she
has seen investments in the omni-channel experience, AI, robo-advisors,
blockchain and mobile.

But these banks still need help connecting user needs with business
drivers. Even for fintechs she said it’s a lot of the old business
models—lending, deposits—just with a “fresh coat of paint.” There is a
need for new ideas and approaches like Ripple.

Radin warned the audience not to write off incumbents because just as
startups don’t “own the market on innovation”—neither do incumbents
“own the market on bureaucracy.”

She did later agree that big companies have a predilection towards
inertia, even joking that many banks pay lots of people to stop people
like her. For these big companies, the reinvention of the how often
becomes more important than having a brilliant idea. In her words, they
want to “engineer for predictability when you’re doing something that is
highly unpredictable.”

Role of regulators and impact

As the panelists discussed the changing nature of regulators in
relation to fintech, it became apparent that Europe and other parts of
the world have a much more collaborative regulatory environment than the
United States.

Ishmael praised regulators in Nigeria for being forward thinking and
helping bring fintechs and incumbents together to create “win-win”
scenarios. Brabyn even went so far as to describe the UK’s Financial
Conduct Authority as the “superhero of fintech” for its support of
innovation. Interestingly, he pointed to an emerging European appetite
to be known as a regulatory superpower that exports standards around the
world.

When asked by an audience member whether it was better to have this
supportive bench of regulators or something more conservative as in the
U.S., the panel replied that both are desirable to create balance.
While Brabyn pointed out that tougher regulations do not deprive us of
innovation, Ishmael said they can even instill a needed level of
discipline.

Applications for blockchain and prospects for fintech

Van Dyke returned the panel to the topic of blockchain and asked each
their thoughts on potential applications for the technology. Ishmael
was passionate about its use in Africa, saying it’s not a “nice to have”
but rather an essential technology for solving access.

She went further, explaining its key areas of application will be in
digital identity and payments. For a continent that lacks an established
identification system (think social security in the U.S.), blockchain
can be transformative. By solving for identity, it can have follow-on
impact and applications in areas like healthcare and education.

For payments, Ishmael pointed to regional, cross border transactions.
Today, those require expensive exchanges into dollars, a costly process
that stifles economic growth. Technologies like Ripple can enable
growth in faster, easier regional commerce. Blockchain can also ensure
the integrity of records and transactions that occur at handoff points
between banks and rural transfer agents where locals deal in cash.

Radin supported the potential for blockchain on a larger, enterprise
scale. She sees “cause for optimism” in the growing quorum of smart
people that view potential in the technology and are experimenting with
real use cases. Radin says that while it will be messy, “there will be
breakthroughs.” She’s so bullish, that she says as an early stage
investor she feels she should have more money in play because there is
going to be a lot of value created.

Prospects for fintech innovation

Brabyn reinforced this tone of optimism but also sounded a note of
caution. He is excited about what the future holds for fintech
innovation, but is concerned that populism and a growing backlash
against technology in general could be red flags. He said as an industry
we must make the case for value in order to earn a license to operate.
Without it, he’s worried we might find the ability to innovate
curtailed.

Ishmael closed on an up-note though. She believes that the time for
distributed ledger technology is now because we have finally become
adept at explaining it and finding use cases. In five years, she thinks
it’ll be integral to everything we do.

In the example of Africa, she forecast that what is known as the
“Last Billion” will leapfrog the rest of the world and demonstrate how
to best use these technologies.